Depreciation, Cost Accounting

This is the amount charged due to the usage and passage of time. Fixed assets are utilized for earning revenue. Thus, a decrease in their value is considered to be the operational expenses of business. So as to ascertain true profits and to illustrate the true value of the assets in the balance sheet, depreciation has to be charged. Reduction account is debited while individual asset account is credited and then the profit and loss account is debited and whereas depreciation accounts is credited.